Investors ended the second quarter of 2022 rotating into 10-year US Treasury bond ETFs amid recession fears and the belief that inflation may have topped out.
The iShares $ Treasury Bond 7-10yr UCITS ETF (IBMT) recorded the second-highest flows with $2.1bn, according to data from Bloomberg Intelligence, in the clearest sign yet investors suspect the Federal Reserve may halt its tightening cycle at a lower level than previously anticipated.
This was followed by the iShares $ Treasury Bond 3-7yr UCITS ETF (CSBG) with inflows of $1.5bn while the Invesco US Treasury Bond 7-10 Year UCITS ETF (TREX) also made it into the top 10 for Q2 with inflows of $550m.
Inflation in the US hit 8.6% in May, its highest rate since December 1981, and analysts are predicting this to rise to 8.7% for June with figures set to come out later this week.
Persistent inflation has caused the US central bank to raise interest rates by 150 basis points (bps) so far this year with the latest a 75bps hike coming in June.
Despite this, it was a broad-based equity ETF that topped the inflow table for Q2, with the iShares Core S&P 500 UCITS ETF (CSPX) recording $2.7bn inflows over the period.
This came despite a sharp sell-off earlier in the quarter, pushing the index into a bear market in May on the back of rising interest rates.
Some may have been encouraged to buy the dip, with the iShares Core MSCI World UCITS ETF (SWDA) also recording $1.3bn inflows. Furthermore, the iShares MSCI ACWI UCITS ETF (ISAC) and the Vanguard FTSE All-World UCITS ETF (VWRA) posted inflows of $660m and $536m in Q2, respectively.
European equities also felt some love, with the Lyxor Core STOXX Europe 600 UCITS ETF (MEUD) seeing the fifth-largest inflows with $983m.
Investors also went dividend hunting in the second quarter in a bid to benefit from the uptick in old economy stocks to shelter from hawkish monetary policy.
Highlighting this, the SPDR S&P US Dividend Aristocrats UCITS ETF (UDVD) recorded inflows of $681m while the Vanguard FTSE All-World High Dividend Yield UCITS ETF (VHYD) posted inflows of $497m.
Although just outside the top 10, a notable mention should go to the iShares MSCI China A UCITS ETF (CNYA) which recorded inflows of $485m over the quarter, as investors bet on the country reaching an inflection point on several key market driving issues.
It came as China’s stock market picked up speed in the second quarter of 2022 with ETFs tracking the world’s largest economy delivering significant outperformance over the three months.
Chinese equities rallied to their highest point since early March and the end of June, however, the CSI 300 index remains 11.4% down so far this year.